COMMENTARY – UK jewellers struggle with cash flow crises, agonising waits for emergency aid


By David Brough

UK jewellers and wholesalers are facing a severe cash flow crisis and agonising waits for financial aid due to the coronavirus-fuelled emergency.

Jewellery retailers have shuttered during the coronavirus pandemic as they are non-essential businesses, and have halted orders to wholesalers as cash flow slumped.

Some retailers have applied for cash grants and are still waiting to receive funds from their local Councils.

However, jewellers have benefited from rates relief, easing their financial plight to some degree.

Jewellers who are seeking bank finance, including interest-free government loans, are facing potentially lengthy delays as banks conduct exhaustive checks of their financial situation.

“We haven’t gone down the path of interest-free government loans as yet, but this is something we may have to consider if the grants are delayed,” said Shalini Gupta-Patel, founder of north London retailer Red Dot Jewels.

Long delays are also expected before retailers can be reimbursed up to 80% of their employees’ wages.

“As an employer it (furloughing staff) was a tough conversation to have had as my staff are so valued. We hope that the cash flow will be there to pay employees and then wait to reclaim the 80% back from the government,” Shalini said.

The owner of another family-owned independent jewellery retailer, who asked not to be identified, said, “We will probably not be able to recoup the lost sales (through the crisis) but have made plans to see how we can generate the momentum as soon as we are back.

“We believe that for the first time ever we will show a trading loss on our accounts as we do not see the prospect of recovering all lost sales.”

Gold Bangles

Gold Price

Bobby Verma of Laxmi Jewellers UK, which is predominantly a wholesaler, said: “In an already struggling and very competitive industry this (coronavirus) has been a big hit to us — employees are asking for 80% pay, customers (retailers) are saying don’t bank our cheques as our shops are closed and we can’t clear the cheques.

“Previously in hard times we could sell metal to the refiners to get funds into the bank, but now they are either closed or are saying we are not buying at the moment… The one or two that are buying are taking advantage of the market and are offering up to 7 percent below the market trading price.

“If this goes on for much longer we will have to melt the stock (gold) and sell the scrap bars at the low price being offered to us as otherwise we cannot fulfil our bank payments and charges.”

A problem for UK jewellers, notably British Asian jewellers who are very active in the gold market, is the “price shock” associated with the surge in the gold price which hit the highest level in more than seven years at $1,702.98 per ounce on March 9 and traded not far short of that level before the Easter weekend.

“From February until now, some traditionally minded traders have been thinking, ‘Prices are high. Should I just sell my stocks and capitalise on the high prices?’

“There is no thought about continuity. This means that sales have taken place – and have not been promptly hedged – and when it comes to restocking, this may come at a higher gold price.”

Another risk element is the highly volatile sterling-dollar exchange rate. Gold and other precious metals and gemstones are denominated in U.S. dollars.

Support for Jewellers

Leading jewellery industry organisations and membership bodies have united to form the Jeweller Support Network, designed to assist independent and family-owned retailers, designer-makers and jewellery trade professionals struggling with the ramifications of COVID-19.

The Jeweller Support Network is a coalition of people, resources and skills, bringing together the Diamond Producers Association, the National Association of Jewellers (NAJ), Company of Master Jewellers (CMJ), Houlden Jewellers, the London Diamond Bourse, the Goldsmiths’ Company, the Goldsmiths’ Centre, the Society of British Jewellers, the Women’s Jewellery Network (WJN) and the Responsible Jewellery Council (RJC).

Simon Forrester, chief executive officer of the National Association of Jewellers (NAJ), said: “The economic impact of the COVID-19 pandemic is still unknown, and is having a disproportionate impact on small and independent businesses that are now facing lengthy closures and restricted access to essential services.

“Together, we can weather this storm by sharing our expertise, knowledge and resources – it is our goal to sustain independent jewellers and ensure they can continue operating just as soon as restrictions are lifted.

“I have been really encouraged by the whole industry getting behind this initiative, and my thanks go out to everyone who has contributed their knowledge and support. We must continue to pull together, or risk falling apart.”

In the front lines of the jewellery trade, much of the pain is due to the slow response of the banks.

Some wholesalers privately lamented that their bank managers were excruciatingly tardy in responding to their requests for emergency loans.

“We wholesalers were affected from the beginning of March and cash flow ceased in the past month,” said one Hatton Garden-based wholesaler, who asked not to be identified.

“As for loan finance, even after applying I still haven’t received a call from my banker. How are we supposed to survive in this time?”

Verma said, “The banks are still open and trading and we are incurring charges every day for overdraft facilities, but on the other hand the customers (retailers) are not honouring their cheques!

“So the overdraft is increasing, charges are increasing, sales are zero, incoming payments are zero. These are very worrying times.”